By Hugo Swire of the UK Foreign and Commonwealth Office
A year ago I spoke at a summit in London hosted by the Financial Times and the Foreign and Commonwealth Office (FCO) about how the UK could work most effectively with the ‘Pacific Alliance’. The consensus then, as it remains today, was that this economic bloc, made up of Chile, Colombia, Mexico and Peru, offered new opportunities for the UK to forge closer ties with Latin America for our mutual benefit. Read more
By Vladimir Tikhomirov, BCS Financial Group
Russia’s central bank faces a dilemma at its monetary policy meeting on Friday. It stated when it hiked interest rates to 17 per cent last month – to their highest levels since 2003 – that this increase would be a temporary measure to defend the rouble. However, inflation stubbornly remains high, restricting the bank’s room to manoeuver.
Indeed, recent inflation data suggests that the new interest rate could stay for much longer. According to the official statistical agency, in December Russia’s consumer price index (CPI) jumped by 2.6 per cent month-on-month which is the highest level on record since the period of mid-1990s when inflation was running at unsustainable high double-digit rates. Read more
By Russ Dallen of Caracas Capital Markets
Investing in Venezuela has always been like praying mantis love. On first acquaintance, Bolivarian Venezuela has those big, beautiful Miss Venezuela eyes and those angelic clasped praying hands inspiring trust and confidence, all backed up by glorious profits and yields. But while other investors in Venezuela – from oil companies, to airlines, to consumer products corporations – have been lured to their demise, bondholders have until the past two years been spared from most praying mantis cannibalism, and the action for bondholders has been great! Even if Venezuela has not paid shareholders of ExxonMobil, ConocoPhillips, or the Koch brothers’ Fertinitro, Venezuela paid the bondholders handsomely! Always! But then came the first sign of trouble, from steel company Sidetur, which the Venezuela government expropriated in 2013 and then didn’t pay its bondholders (or shareholders). Read more
After a difficult two years that saw five governments, ongoing street protests and a banking crisis, Bulgaria’s politics and economy may be getting back to something approaching normality in 2015.
Blessed with greater stability – but with a significant fiscal deficit and loans to repay – the county plans to raise 6.9bn lev (€3.5bn) from bond issues this year. But investors may still be wary of the risks of a slow-growing country with a recent history of instability. Read more
for the beyondbrics email headlines service: our London and New York morning espressos, featuring the top FT emerging markets stories and opinion, plus the best reads from beyondbrics and around the web and the latest market prices.
It's free - so sign up here.
Clouds hang over Russia and challenges abound in Latin America and South Africa, but emerging market (EM) consumers remain robust in Asia and are voracious almost everywhere when it comes to buying cars, smartphones and holidays, a survey of 16,000 EM consumers conducted by Nielsen, a research firm, shows.
The survey – conducted in Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, Turkey and South Africa for Credit Suisse – shows that differentiation between countries and products is key to understanding EM consumer trends this year, rather than generalising across emerging markets as a whole. Read more
** FT News **
* Shell earnings hit by plunging oil price | Energy group outlines plans to slash capital spending by $15bn
* China tallies Communist party suicides | Official survey into ‘unnatural deaths’ among members in wake of anti-graft campaign Read more
The Chinese banks and companies that have bankrolled Sri Lanka’s recent infrastructure boom have much to lose from the recent change of government.
To prime Sri Lanka’s economy in the aftermath of the damaging Tamil separatist war, Mahinda Rajapaksa, the outgoing president, pursued a Chinese-style growth model of massive infrastructure investments in roads, energy projects, airports and sea ports. Much of this was bankrolled by loans and grants from Chinese state-owned banks: by last May, these totalled $3.8bn, according to the Sri Lankan government (the China peoples daily and Times of India last year put the total closer to $5bn). Read more
It’s been a few years since the guns of the international currency wars fell silent, or at least until the main combatants turned most of their attention to other things.
With the strength of the dollar, however, the issue might easily re-emerge. If it does, even if the eurozone and Japan are the main initial targets, emerging markets are unlikely to be able to sit out a renewed burst of hostilities. Read more
** FT News **
* Isis sets deadline for hostage exchange | Jordan told to swap captive for Japanese hostage by sunset or its pilot will be killed
* Asia equities slide on Fed rates hint | Bourses across region fall after US remains on course for midyear rate rise Read more
Mayors fronting drug cartels, a union leader splurging thousands on cosmetic surgery, and a multi-million-dollar mansion reportedly gifted to the president by a federal contractor. Enrique Peña Nieto’s first two years in charge have not been short of scandals.
Peña Nieto was pitched by many as Mexico’s great reformer. Since taking office in December 2012, the Institutional Revolutionary Party (PRI) politician has achieved the seemingly impossible, ushering through a string of key economic reforms with a view to boosting investment, competitiveness, and growth. Read more
Emerging market currencies may have received a boost against the dollar last week after the European Central Bank announced its programme of quantitative easing, with those of South Africa, Russia, Turkey and Brazil all strengthened by the news. But the more important stories for investors over the mid term are the effects of cheaper oil and the state of countries’ current accounts.
On the face of it, whether a country exports oil seems to matter more to investors right now than the state of its current account. Read more
Russia’s economy is heading for a deep recession this year. Brazil is stagnating and China’s dynamism is dissipating, helping to depress the prices of commodities that many developing countries produce. But in spite of such afflictions, analysts caution against thinking that a multi-year consumer bonanza in emerging markets (EM) is running out of steam.
The “biggest growth opportunity in the history of capitalism”, as McKinsey called EM consumer spending in a 2012 report, may suffer setbacks in some key markets this year, but overall the narrative is set to flourish as disinflation triggers interest rate cuts and low oil prices put more money into EM consumers’ pockets, analysts said. Read more
** FT News **
* Yahoo to spin off $40bn Alibaba stake | Marissa Mayer says split in fourth quarter of 2015 will be tax free
* Greeks rebuff EU call for more Russia sanctions | Fears growing that new ruling coalition in Athens is seeking closer ties with Moscow Read more
A year ago when the Olympic torch arrived in Sochi, many observers were warning that interest in the Russian Black Sea resort would fizzle out once the 2014 winter games were over. But that was before western sanctions and falling oil prices began weighing on the Russian economy and sending the rouble into a nosedive.
Russians no longer able to afford foreign ski holidays and chalets are now flocking to the slopes of Sochi and investing their depreciating rubles in mountain side homes built for the Olympics. For the first time Sochi has been included in the annual ranking of the world’s top twenty ski resorts by price growth for prime residences, compiled by Knight Frank, the global real estate consultancy. Read more
Maruti Suzuki led a two-track recovery in India’s car industry last year, dragging up overall sales while local competitors such as Tata Motors floundered. But new figures out on Tuesday have disappointed analysts in the festive period.
The 32 year-old brand, with a reputation for churning out reliable and affordable cars, posted net profits of Rs8.02bn ($131m) in the quarter ended December, up 18 per cent year-on-year. That’s well below an average forecast for profits of Rs9.06bn in a poll by Thomson Reuters. Read more
** FT News **
* China seeks end to gold medal fixation | ‘Blind pursuit’ of success condemned as sports administrator scraps rewards for victory
* EU threatens Russia with more sanctions | Call comes as violence in eastern Ukraine escalates Read more
By Peter Leger, Coronation Fund Managers
So you thought a six-month break on a desert island looked appealing and spent long hours in silent meditation, reflecting on self-actualisation, harmony and humanity’s ceaseless race to consume the planet. Now you’ve just made the return journey to find that the oil price collapsed from over $110/barrel to less than $50. Peak theorists having turned into piqued theorists. You didn’t see that coming. And, frankly, neither did we. Nor did we expect to see the Swiss franc jump 28 per cent in a single day – as it did recently.
The lesson being that extreme volatility has to be an assumption when building portfolios, and doubly so when investing in frontier markets, where volatility is often amplified. Read more
It has not exactly been the January that some investors were hoping for in Argentina.
The notorious “Rufo” clause (for rights upon future offers) in restructured debt contracts appears to have been the red herring that many had warned it was when the government cited it as an excuse for not cutting a deal with the holdouts last year, triggering Argentina’s default in July. Read more
** FT News **
* Russia downgraded to ‘junk’ by S&P | Shift underscores dramatic economic deterioration
* Kurds claim victory over Isis in Kobani | Forces claim to have wrested back control of Syrian border city after four-month battle Read more
Pemex, the Mexican state oil company, is being forced to sharpen up its act.
Not only are costs under pressure, so is its reputation. Read more